Annual return
The rate of return that a fund earns over a specific 12-month period.
Annualized return
The rate of return for a period greater than one-year, converted to a yearly rate. For example, a fund with an annualized three-year return of 10 per cent has grown by the same amount as a fund that experienced an annual return of exactly 10 per cent in each of the past three years.
Compound interest
Interest paid on both the original investment, as well as on the interest the investment accumulates.
Consumer Price Index (CPI)
This is an indicator that measures the rate of inflation, which is the rise in the cost of a fixed basket of products and services such as housing, electricity, food, and transportation. An increase in the CPI signals an increase in the overall cost of living.
Defined Benefit Pension Plan
A defined benefit pension plan provides an income at retirement based on a pre-determined formula. The formula used to calculate the pension is typically based on the number of years of plan membership and the average earnings of the employee.
Defined Contribution Pension Plan
A defined contribution pension plan provides a lump-sum value at retirement that can be used to purchase a retirement income product such as an annuity, LIF, or LRIF. The lump-sum value is based on the money contributed to a member's pension account and any income, expenses, gains, and losses that result from investing the money in the pension account.
Diversification
The practice of reducing investment risk by investing in different asset classes, volatility and fund managers.
Dollar-cost averaging
A technique whereby an investor contributes regular amounts on a fixed schedule, regardless of changes in the market. On average, the investor should end up buying more fund units at a lower price and fewer fund units at a higher price.
Foreign Content
The percentage of foreign investments in your portfolio. Any fund that invests more than 30% in securities from outside of Canada is 'foreign content' in your portfolio. Foreign content is measured as the value of the investment when you purchased it (book value), current value (market value).
Fund manager
The person who selects the investments that meet the fund's investment objective. A professional fund manager manages each fund in your group plan.
Gross return
The rate of return for a fund before investment management fees have been deducted.
Index fund
A fund that is managed to track the performance of a specified market index such as the S&P/TSX Composite. With an index fund, the manager does not attempt to anticipate which companies will provide better returns. Rather, they manage the fund to provide a return as close to the index as possible.
Inflation risk
The possibility that increases in the cost of living will significantly erode investment returns.
Investment management fees
Collected by Manulife Financial to cover the cost associated with investment management and administrative expenses. The fee is deducted from the fund before calculation of unit values.
Investment style
The methodology a fund manager uses to decide which securities to buy and sell.
Locking in
Locking in is a legislative requirement that states that benefits are not available in cash. Locked-in benefits must be used to provide a retirement income once a member reaches retirement age.
Net return
The rate of return of a fund after the investment management fees are deducted.
Portfolio
The various investments held by an individual or institution.
Rate of return
To calculate the rate of return on your investment, you compare the original amount of the investment to the value of the investment at the end of a specified period of time.
Registered Pension Plan (RPP)
See Defined Benefit Pension Plan and/or Defined Contribution Pension Plan
Registered Retirement Savings Plan (RRSP)
A plan to help individuals save for their retirement and defer paying tax on contributions and earnings in the plan until they are withdrawn.
Risk
In investing, risk typically refers to the possibility that an investment will lose money. Risk also occurs when investments are too conservative to achieve financial goals.
Risk tolerance
An investor's ability to handle declines in the value of his or her portfolio.
Vesting
Vesting refers to entitlement to all or part of the employer's contributions made on behalf of a plan member.
Volatility
The tendency of a fund's value to fluctuate up and down over time. The value of a fund with high volatility will go up and down more dramatically over time than the value of a fund with low volatility.